According to the Economist there are new bubbles being formed such as government bond in developed countries, emerging markets such as China, gold, real estate in developed markets, and others.  Given all of these temptations what should the smart investor do?


In which markets are going to be the future drivers of growth?

Kuwait Asset Management, CEO of KAMCO, Sadoun A. Ali: I believe all of them because they are all related to the needs of humans.  Real estate, for example, is important for the development of the country because humans need facilities and the companies need to fulfill these needs so it’s a cycle. In talking about gold, gold is a safe natural resource that can be liquidated and no matter what happens gold will remain.

“For the Kuwaiti capital markets to develop and compete effectively as well as meet the needs and wants of investors investment companies should be allowed to provide all products and services available in other developed financial centers”  What is your frank assessment of the Kuwaiti capital market and in your opinion should they do more liberalization or regulation?  What should be done to attract large institutional investors from abroad?

Kuwait Asset Management, CEO of KAMCO, Sadoun A. Ali: It is a combination.  I believe there is enough liberalization but the problem is the regulations.  To attract outside investors things need to be transparent for everybody and it has to be up to international market standards.  To enhance and convince people to come and invest in Kuwait these types of things will be required.  I believe the government of Kuwait is very serious about developing these kinds of regulations and the CMA law has been passed and is under review.  This will enhance implementing the regulations to give more comfort for people coming into Kuwait. The other side of the issue is commercial law and this is a very old system that was not designed at the time to be enough and in line with what has happened in the world.  They are trying to revise the old commercial law standards for improvement and we are participating in this review as well.  For example, the current commercial law has limitations for board members and commercial law does not cover the expatriate population and this makes the process of establishing a company very difficult.  The integration of commercial law with other laws (like environmental law, government essential resources law, etc.) needs to be done as well.  Licensing is very difficult because there are no clear guidelines.  This law is coming up on the parliament agenda soon so we will soon see what will happen in order to enhance our outside investments in Kuwait.

It has been said that Kuwaiti banks have been more resilient to Kuwait backs more so than others in the GCC region.  What is your overall assessment of the banking and finance sector in Kuwait and what positive leads make you think that the slump is ending?

I think the Central Bank of Kuwait is watching the commercial and Islamic banks in Kuwait very closely and they have taken a lot of steps to protect the banks here and the government is protecting most of the deposits for individuals and institutions.  The exposure of local banks to international banks is being watched very closely as well and it will be controllable.  The shareholder of these banks are very committed in the even something happens and they are willing to be there in the event of crisis.  We have very good regulators and Kuwait has a lot of past experience to draw off of.  

Recently we have seen high volatility in the market, when do you think the market will stabilize and rebound? What is the outlook for 2010-2011?

Kuwait Asset Management, CEO of KAMCO, Sadoun A. Ali: The GCC area needs to be further developed in many areas.  With the oil price being sustained where it is today I think it will create enough surplus for these countries to deploy money into their economy.  Having said this we are more optimistic for these markets because it is a chain.  If the government uses the surplus in the right way it will reflect positively on the companies listed in the market.  People also have learned from the crisis and as they become more experienced they can distinguished between good and bad companies and pricing.  In the media we have been working very hard to get people to read into the companies and we want them to know they need to research companies to see why some sustain and survive in the market.  Making decisions based off of rumors is the wrong method of operation.  

KAMCO’s conservative investment strategy has helped in mitigating risk.  KAMCO posted a net profit of .88 million KD for third quarter 2009, how would your characterize your investment strategy and how does it differ from your competition?

Kuwait Asset Management, CEO of KAMCO, Sadoun A. Ali: I think other companies deviate too far from their business line by jumping into different businesses and this hurts the core business.  Since we have been established we have been very focused on creating facilities for our clients that relate to our core business.  All of our services are linked to the benefit of our clients.  I think the last two years the cash flow and structure of the balance sheet say a lot about our performance, more so than the profit.  Profitability doesn’t always mean a company is healthy.  Cash is king.  The most important thing is that we structure our finances to survive and be strong enough to meet any crisis that may occur.  Survivability and continuation are very important for any company.

How would you define your greatest challenge?

Kuwait Asset Management, CEO of KAMCO, Sadoun A. Ali: Our major challenge is business itself.  The last year we structured our debt and we renewed most of our banking line.  We define the financials our KAMCO in terms of short, medium, and long as it concerns the criteria of the asset.  Each one has its own business plan and investment policy that we have carefully defined in each area and monitor closely.  Business is very important for KAMCO because a big portion of our revenue comes from surfaces. We are very attached to those companies and investment banking and asset management is very linked to the health of the economy.  We believe that surplus from oil sales will put the market and the economy in good shape and this will allow us to function very effectively and this will reflect very positively for 2010 and beyond.  

How do you see KAMCO regionally?

Kuwait Asset Management, CEO of KAMCO, Sadoun A. Ali: To be honest KAMCO believes we have done very well in influencing the local market. We have made a lot of transactions and gained good experience and we think we can do this in the MENA and GCC region as well.  With regard to expanding in the GCC and MENA we believe we can succeed in create opportunity and wealth just like we have in Kuwait.  We are targeting Saudi Arabia, UAE, and in the MENA region Algeria and Libya.  North Africa Holding Company is joining up with a small company to activate our function in that area as well.  We are keen to move further into the GCC and MENA in the future.

Would you like to enter those markets as KAMCO or as another brand?

Kuwait Asset Management, CEO of KAMCO, Sadoun A. Ali: Culture is very important in the market and you need to understand what attracts people.  Wataniya went to Algeria and called their company Al Najma and this means the Star.  In the culture of Algeria this name has significant meaning and they used the name to make Al Najma a regional brand to reflect the people of the area.  We will, of course, we discussing these matters with our partners to make a decision.  Partnering up is very important when you expand into new markets

How do you define your clients and what kind of added value have you been able to provide them during the crisis?

Kuwait Asset Management, CEO of KAMCO, Sadoun A. Ali: We have very strong communication with our clients and we have a client relations department.  We issue reports to our clients multiple times a year and we make a lot of visits in Kuwait because people like the institutions to come visit their companies to aid in understanding.  KAMCO belongs to KIPCO so we have a lot of assets we have used to protect our shareholders and client’s money as well.    We also introduce opportunities to our clients and with the crisis a lot of opportunities have arose and we help them see the value in these opportunities.  When people become scared of the economic situation they run away and are very cautious but our intention is to show them that we are confident in what we do and that we can combat the crisis with new and thriving opportunities.  Further, our clients are mostly local but we do have a few from the GCC and MENA region as well.  It is really dependent on what people like.

What do you believe will happen in 2010?

Kuwait Asset Management, CEO of KAMCO, Sadoun A. Ali: I am optimistic more so than I am pessimistic.  It is linked because if certain indicators come to pass we will be in good shape.  We have seen the liquidity in the market start to improve and now we are waiting to see the results.  This is a good sign because it improves confidence in the market.  Also the government being proactive with new deals and contracts is a positive indicator as well.  For example, they have started contracting an airport and this means that they are planning to do this. The stability of the political affairs is also promising for good things to happen in 2010 and beyond.

How do you address corporate social responsibility?

Kuwait Asset Management, CEO of KAMCO, Sadoun A. Ali: We believe that institutions should contribute to society.  We have already done a lot of sponsorship activities, in particular we sponsored Kuwait University in a joint effort to help students be online and practice in the lab.  We have increased our participation in this program also by giving lectures and providing further resources to students.  We have also participated in football tournaments during Ramadan by being a golden sponsor because we saw this has a healthy thing for the youth to interact among various societies.  This is a message we would like to address and have a hand in because we see these interactions as very important.  Additionally, we are providing training for university students in the summertime where we let them learn day-to-day business and we donate 1% of our net profit to good deeds projects in society.  

What is your vision for Kuwait’s financial institutions?

Kuwait Asset Management, CEO of KAMCO, Sadoun A. Ali: I believe our Emir and the Crown Prince and Prime Ministers are sending messages to Kuwaitis and the financial institutions for Kuwait to become a financial center.  If they truly believe this this gives us great hope as financial institutions.  We have to learn from the past and be optimistic about Kuwait’s future.  I believe that if there is peace in this part of the world that the value will show through here in Kuwait and I am excited for Kuwait’s future.  As institutions we have to do a lot of work to make this story happen, participate with the government, and execute their plans for country development.